Researchers Find Little Evidence For Link Between Disability Insurance Benefits And Decline In Labor Force Participation By Those With Work Limitations

Over the last 25 years, the Social Security Disability Insurance Program (DI) has grown
dramatically. During the same period, employment rates for men with work limitations
showed substantial declines in both absolute and relative terms. While the timing of
these trends suggests that the expansion of DI was a major contributor to employment
decline among this group, raising questions about the targeting of disability benefits,
studies using denied applicants suggest a more modest role of the DI expansion. To
reconcile these findings, we decompose total employment changes into population
and employment changes for three categories: DI beneficiaries, denied applicants,
and non-applicants. Our results show that during the early 1990s, the growth in DI
can fully explain the employment decline for men only under an extreme assumption
about the employment potential of beneficiaries. For the period after the mid-1990s,
we find little role for the DI program in explaining the continuing employment
decline for men with work limitations.